AIG(AIG)2025-02-13 21:49Financial Performance - AIG achieved a strong combined ratio of 91.8 and an adjusted accident year combined ratio of 88.2, indicating effective underwriting performance [26]. - The company generated 7 billion of cumulative underwriting income from 2021 to 2024 [26]. - AIG reported net premiums written of 6.0 billion [26]. - The company divested its global individual personal travel insurance business for 6.6 billion of common stock, reducing outstanding shares by 12% [26]. - The company ended 2024 with parent liquidity of $7.7 billion, demonstrating strong financial health [26]. Regulatory Environment - AIG's insurance subsidiaries are subject to extensive regulation and supervision, impacting their operations and profitability [49]. - The Risk-Based Capital (RBC) levels of AIG's U.S. domiciled insurance companies exceeded specific thresholds as of December 31, 2024 [58]. - AIG is now formally subject to the Group Capital Calculation (GCC) requirement beginning in 2024, which evaluates the firm's capital position at the group level [60]. - The aggregate assessments levied against AIG by state insurance guaranty associations have not been material to its financial condition in the past three years [61]. - AIG's insurance operations in the EU are governed by Solvency II, which includes minimum capital and solvency requirements [69]. - The Monetary Authority of Singapore (MAS) imposes minimum capital and solvency requirements on AIG's insurance subsidiary in Singapore [71]. - AIG's Japanese insurance operations must maintain a minimum solvency margin ratio (SMR) to avoid corrective actions from the Japan Financial Services Agency (JFSA) [72]. - The Dodd-Frank Act established the Federal Insurance Office (FIO) to monitor the insurance industry and recommend prudential standards [63]. - AIG's lead U.S.-state regulator is the New York State Department of Financial Services (NYDFS), which oversees its regulatory compliance [58]. - The Financial Stability Board (FSB) promotes international financial stability and issues frameworks addressing systemic financial risk and capital standards [73]. - The IAIS has adopted a risk-based global Insurance Capital Standard (ICS) applicable to Internationally Active Insurance Groups (IAIGs), which was formally adopted in December 2024 [76]. - The FSB will begin publishing an annual list of insurers, including AIG, subject to resolution planning requirements starting December 2024 [75]. - The NAIC Data Security Model Law has been adopted by more than 20 jurisdictions as of December 31, 2024, requiring insurers to develop and maintain a written information security program [81]. Cybersecurity and Data Privacy - The SEC has mandated that registrants disclose any material cybersecurity incident on Form 8-K within four business days [84]. - The EU General Data Protection Regulation (GDPR) imposes fines of up to 4% of global revenue for serious infringements, affecting compliance costs [85]. - The California Consumer Privacy Act (CCPA) and its amendments impose significant privacy obligations on businesses handling data related to California residents [82]. - The company is subject to various laws and regulations requiring notification of data breaches to affected individuals and regulators [79]. - The company actively monitors the regulatory landscape surrounding climate change and its implications for governance and risk management [92]. Economic and Market Risks - The company faces significant risks from economic conditions, including potential recessionary environments and market volatility, which could adversely affect business operations and financial condition [104]. - Increased loss payments and costs due to inflation have been noted, impacting profitability and potentially leading to higher credit impairments across various asset classes [107]. - The company is exposed to risks from fluctuations in interest rates, which could materially affect the value of its investment portfolio and lead to increased unrealized losses [109]. - The adequacy of reserves for unpaid losses and loss adjustment expenses is under continuous review, with potential adverse developments impacting financial results [112]. - Reinsurance availability and costs are influenced by market conditions, with recent years seeing increased severity and frequency of major catastrophes affecting reinsurance terms [117]. - The company relies on the Terrorism Risk Insurance Program, but coverage for terrorism-related losses remains limited, posing additional risks [120]. - Catastrophic events, both natural and man-made, have historically impacted the company's operations and could lead to significant losses in the future [122]. Competition and Operational Challenges - The company is subject to intense competition across its business lines, which may be exacerbated by technological changes and evolving market dynamics [118]. - Legal and regulatory changes, including those related to environmental, social, and governance matters, may adversely affect the company's reputation and operational results [119]. - The company may face challenges in attracting and retaining key employees due to intense competition in the industry, which is critical for its success [118]. - Legislative and regulatory initiatives may require the company to pay insured amounts beyond original policy provisions, potentially impairing cash flows and capital ratios [124]. - The company faces widespread claim costs associated with various insurance types, including property, casualty, and cyber claims, which could adversely impact financial performance [124]. Climate Change and Environmental Risks - Climate change has increased the frequency and severity of natural disasters, presenting significant financial implications for underwriting, claims, and investments [126]. Investment and Liquidity Risks - The company is exposed to credit risk from counterparties, including issuers of securities and reinsurers, which could materially affect investment value and profitability [137]. - The investment portfolio is concentrated in specific segments, such as real estate and financial institutions, making it vulnerable to adverse developments in those areas [139]. - The company relies on external investment managers for the majority of its portfolio, which may expose it to risks if these managers fail to meet performance expectations [144]. - Liquidity may be insufficient to meet the company's needs, potentially requiring recourse to expensive external financing [152]. - The company may face challenges in generating cash due to the illiquidity of certain investments, which could adversely affect financial condition and operations [154]. - Adverse changes in market conditions could materially impact the liquidity and value of the company's investment portfolios [156]. - A downgrade in the Insurer Financial Strength ratings could limit the ability of the insurance companies to write new business and impair customer retention [158]. - Downgrades in credit ratings may increase financing costs and limit availability of financing, adversely affecting business operations and liquidity [158]. Risk Management and Compliance - The company is enhancing risk management policies to identify and mitigate risks, but effectiveness is uncertain and may not cover all potential exposures [160]. - Pricing adequacy for products depends on accurate risk assessment and market conditions, with potential adverse effects on profitability if pricing is inadequate [163]. - The company is exposed to risks from reliance on critical technology systems, which could compromise business operations if disrupted [164]. - Cybersecurity threats are evolving, requiring significant resources to manage and mitigate risks associated with data breaches and system failures [166]. - Compliance with privacy and information security laws is critical, with potential legal and financial repercussions for non-compliance [172]. International Operations and Third-Party Risks - A substantial portion of business is conducted outside the U.S., exposing the company to risks from foreign regulations and economic conditions [173]. - The company must satisfy local regulatory requirements in foreign jurisdictions, with potential impacts on operations if licenses are modified or revoked [174]. - Third-party service providers may not perform as anticipated, which could adversely affect business operations and results [177]. - The company relies on third-party providers for various operational processes, which may lead to risks including operational difficulties and increased costs [178]. - A significant portion of the company's investment assets is managed by third-party investment managers, and past performance does not guarantee future results [179]. - The company faces risks from third-party providers located outside the U.S., including potential business disruptions and political risks [180]. Distribution and Marketing Challenges - The company may experience difficulties in marketing and distributing products through current and future distribution channels, which could adversely affect sales [182]. - Key distribution partners may renegotiate terms or terminate relationships, impacting the company's ability to market products effectively [183]. Legal and Intellectual Property Risks - The company is exposed to risks from legal and regulatory proceedings, which could result in fines, penalties, and reputational damage [197]. - The divestment of Corebridge stock may lead to risks including economic downturns and unfavorable market conditions affecting the company's financial condition [195]. - The company is subject to increasing scrutiny regarding environmental, social, governance, and sustainability matters, which may impact its reputation and operations [201]. - The company may not fully realize anticipated expense reductions and operational efficiencies from restructuring initiatives, potentially harming its competitive position [188]. - The integration of acquired businesses may not yield expected benefits, and undisclosed risks could negatively impact financial performance [190]. - Public health crises, such as the COVID-19 pandemic, have led to significant societal disruption and economic uncertainty, adversely impacting the company's business and financial condition [207]. - Increased claim volumes and exposure to certain industries have resulted in greater variability and subjectivity in investment decisions, potentially leading to impairment of estimates and assumptions [208]. - Future public health crises may cause heightened market stress and volatility, adversely affecting the company's operations and financial condition [209]. - Legal proceedings related to epidemic or pandemic losses could be filed against the company, which may result in additional operational risks [209]. - The company faces challenges in protecting its intellectual property, which may lead to costly litigation and potential damages [210]. - Third parties may infringe upon the company's intellectual property rights, resulting in significant expenses and operational limitations [210]. - The inability to secure or protect intellectual property assets could harm the company's reputation and competitive position [210].